The country’s scheduled banks should detect wilful loan defaulters for whom ensuring good governance in the banking sector has become a big challenge, experts and bankers said in Dhaka on Thursday.
The wilful defaulters have caused increasing financial corruption in the banking sector in collaboration with some dishonest bankers, they said at a seminar on ‘Addressing Financial Crime in the Banking Sector of Bangladesh’ organised by the Bangladesh Institute Bank Management at its auditorium in the capital.
BIBM professor and director Shah Md Ahsan Habib presented the keynote paper saying that it was well known that defaulted loan was a critical challenge for the country’s banking sector.
It is indeed essential now to draw a line between loan default for genuine reasons and the wilful defaults, he said.
The provision of loan classification norms of the country does not make a distinction between wilful and other forms of defaults and there is no requirement of reporting to the central bank about the wilful defaulters.
Bangladesh Bank deputy governor Abu Hena Mohd Razee Hassan was the chief guest at the seminar chaired by BIBM director general Toufic Ahmad Choudhury.
BIBM professor SA Chowdhury said some
wilful defaulters had frequently taken stay orders from the High Court against their non-performing loans, popularly known as NPL, to show them as regular credit holders.
The wilful defaulters take fresh loans from the banks by misusing the scope which has eventually become a major concern for the banks, he said.
The central bank should issue a circular in this regard so that the wilful defaulters, who take stay orders from the High Court against their NPL, are not allowed to take fresh loans, Chowdhury, also a former managing director of Sonali Bank, said.
He said, ‘We earlier hoped that financial corruption would decrease with the full-fledged start of electronic banking. But, corruption did not decrease despite the start of a full-swing electronic banking’.
The banks should form financial intelligence units respectively to detect their corruption led by Bangladesh Financial Intelligence Unit, a wing of the BB, Chowdhury said.
‘The boards of directors of the banks have recently given pressure to the management to make more profit which has opened an window for more corruption. In line with the instruction, the bankers disburse loans irrespectively without proper verification’, he said.
BIBM supernumerary professor Md Yasin Ali said that the officials of the banks were involved in 90 per cent of fraudulent acts in the banking sector.
‘The officials disburse loans to the wilful defaulters by taking fake documents. Wilful default is a financial crime. The authorities concerned should take action against the responsible people,’ he said.
City Bank additional managing director Faruq Moinuddin said a number of financial corruptions had been perpetrated in the recent years but there was no judgment.
‘Reserve Bank of India, the Indian central bank, has asked the banks to submit report about wilful defaulters. But, our country’s wilful defaulters frequently make foreign trips with prime minister,’ he said.
Former BB deputy governor Ibrahim Khaled said the banks should arrange fundamental and comprehensive trainings for the officials to ensure good governance.
‘The officials will not be able to claim that corruption occurs due to their lack of knowledge about the banking rules and regulations if the banks organise workshop on regular basis’, he said.
The authorities concerned should think of establishing a separate supervision body along with the exiting central bank’s activities to monitor the banking sector as the incidents of financial crimes continue to increase, Khaled said.
Different countries have established such type of body to tackle financial corruption, he said.
The directors of the banks have recently demanded that the finance minister change the bank company act so that they can hold their directorship till their death, Khaled said.
They also demanded that no-objection certificate not be taken from the central bank before holding directorship in a bank, he said.
‘The banks usually transact huge amount of money. Interests may be grown for any people for the money if he or she hold directorship for long’, Khaled said.
The chief executive officers of the banks remain present when the directors meet finance minister AMA Muhith which is a new phenomenon, he said.
Such type of attachment between directors and CEOs is harmful for the banking sector, Khaled said.
According to the BIBM research paper, 65 per cent of the banks faced financial crime during 2014-16.
‘It can be observed in some cases that banks’ lending criteria were compromised due to the failure of the bank officials to stand before the reference power of the powerful quarters’, the paper said.
These are instances where chairmen and board members frequently intervene in the day-to-day credit decisions of the bank which reflects the weak corporate governance practices and lack of professional ethics in the banking sector, according to the research paper.
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